Transcription
Marketing, when done completely and holistically, is a multiplier on all your other business processes. During my 35 years in business, I built one of the most successful marketing agencies in Asia. I sold that company to PWC for more money than I'll ever need. I am one of the best in the world at marketing, but the genius I'm about to introduce you to is even better than me. Rory Sutherland is the Vice Chairman of Ogilvy, one of the biggest marketing agencies in the world, which makes over 5 billion a year in revenue. Today, he's going to talk you through his 10 rules for making million-dollar marketing campaigns. So, if you can't sit down, get a notepad and listen, I'm sorry, you're probably not going to make it.
This video is broken into 10 chapters:
1. People: How to get anyone to buy anything.
2. Why your business is nothing without marketing.
3. Why relationships are essential for business success.
4. How to get customers for cheap and maximize profit.
5. Why charging more will get you more customers.
6. Price versus quality: What matters more?
7. Why your business will fail without this.
8. How to make it impossible not to buy.
9. Save time and money by doing this.
10. How to become a master.
Now, let's jump in.
"Marketing is a very general thing, so, um, how do you want to cover it? Any thoughts?"
"Very simply, it's about people, um, and it's about ultimately, it's about creating behavioral change, right? Uh, there's no real purpose, you know, unless it results in a change of behavior. Now, the means you may adopt to change behavior might be weirdly oblique, okay? E.g., if you make yourself famous, it changes behavior because people come to you rather than you needing to find them all the time, which is much better. Proactive sales versus reactive sales."
"Reactive sales is much better. People come to you."
"To exactly. And, and, and actually, uh, one of the things I might say is that the way of measuring marketing via ROI, uh, is a mistake. That the whole obsession with the quantification of marketing. Marketers have always had, kind of, what you might call logistics envy or procurement envy. They envy those parts of the business that can notionally prove their value on a spreadsheet, um, absolutely down to the last cent. And so marketers have always had this urge to do it. And when, therefore, the sort of tech, come consulting, come finance, uh, industrial complex, when it sold marketing on this idea of perfect accountability, all the marketers were very willing to go along with it because it was what they'd always dreamed of. And, you know, I was in direct marketing, that's what we always kind of aspired to and loved. It's actually a mistake because marketing, when done completely and holistically, is a multiplier on all your other business processes. It affects who you hire, how much you pay them, how long they have to stay. It affects whether your chief executive gets his phone calls or her phone calls returned. In other words, the, the best description I've ever heard of it was actually used of having a great brand is that it's like playing the game of capitalism on easy mode, yeah. In other words, all the things you have to do become less friction-full, less, you know, uh, faster, uh, less expensive, less burdensome than they were before if you've got your marketing aligned to begin with. But I think ROI got put into place. It's a bit like the school system. How do you measure success? Getting an A. Many, right? It's just quantification. So if, if people want to, oh, let's say brands are listening right now, I mean, how would they, what's the other method for them to measure an effective use of their investment?"
"The argument would be that you can measure what you do, but you should not assume that what you measure is the sum value of what you're doing, nor should you make the criterion that you can only do what you measure. And that, that's where it's become problematic. In other words, there are very, very valuable things you can do which would almost certainly be profitable, okay? And you're now no longer allowed to do them, okay, unless you can prove, not only prove, absolutely, but very quickly, the value of the activity. Now, one of the things that obsession with quantification has caused is, I think, severe underinvestment in customer service. Mmm. Because the value of customer acquisition or customer acquisition activity is always both more measurable and much faster to reveal itself than the value of keeping a customer. You might, you might have an example of say, for example, high street banks where customers hardly ever leave anyway. I mean, they may actually migrate to Monzo, but they'll keep their current account open, they won't actually close it. What happens, of course, in say, something like banking, is that if your customer service is bad, if your customer experience is bad, what actually happens is your customers basically just become inert. But it might take five years to reveal itself, and nobody's got the patience to wait. And consequently, they'll spend money on acquiring new customers to replace the customers they're losing, simply because that's a more quantifiable activity than keeping the customers you have in the first place. And so I think there are some fairly gross distortions whenever you, there, there's a great thing called Goodhart's Law, which is any metric that becomes a target loses its value as a metric. In other words, it creates its own distortions in behavior. One of the things I regard as highly dubious at the moment is that, um, there's an enormous drive to interacting in digital media. Not, not a ridiculous thing to do to some degree, but it's reached a point where people are defining their customers as those people who are prepared to interact with them in low-cost channels with the minimum of persuasion. Okay? So if you, if you use programmatic digital as the kind of measure, the, what you might call the highest form of customer acquisition, yes, it's a very good idea if you can to sell to those people who are prepared to be sold to very cheaply, or who are prepared to buy on impulse, or who are, you know, susceptible to promotional offers. Not a, not a crazy thing. However, what then starts to happen is you define your customer universe as those people who are prepared to interact with us in low-cost channels. And the truth of the matter is that the better way to do marketing is to define your, um, customer universe, your potential customer universe, and then to sell to as many of those people as you can profitably over time, okay? Or form relationships with, with as many of those people as you can profitably over time, okay? Not optimizing, optimizing for overall value and scale, not optimizing for the efficiency of the transactional process. Okay?"
"Now, just as an example of this, I, you know, I use train examples quite a lot. Um, you have, um, very simply, uh, there was a lot of pressure to get rid of manned ticket offices, uh, in stations, and effectively everybody would buy a rail ticket through a mobile phone or possibly through a, a credit card vending machine at the station. Um, now, okay, people who are prepared to buy tickets through a highly automated process are indeed slightly more profitable than people who, uh, aren't. However, there is and will always be a significant number of passengers and or a significant number of journeys which require a conversation. They require a human conversation in order for them to happen. And that might be, for example, um, certain people don't have mobile phones, certain people don't like operating machines, okay? That's just a preference thing. But there's also the fact that there are certain journeys, even someone like me, who would always use a machine or an app for journeys they make every day where they know exactly what they want, there are certain kinds of journeys where you actually want a discussion because you need reassurance that the route you're planning to take or the ticket you're planning to buy isn't insane."
"So let me give an example, okay? In London, you know, generally transactions tend to be quite impersonal and they're all optimized for speed. Once you get outside London, actually, fundamentally capitalism is slightly different. Every single financial transaction contains an element of a social transaction. And an example would be, for example, uh, if, if you're in Deal, which is in East Kent, and you said, 'I'd like to go to London tomorrow and I need to get to St Pancras by whatever it might be, 10 and 12,' okay? They'd say, 'Well, look, mate, don't buy the, uh, peak, uh, return ticket. What you need to do is, I'll buy you a peak ticket to Dover, at which point the train becomes an off-peak ticket. Then I'll buy you an off-peak day return with your Railcard to and from Dover, and then I'll give you a single, you know, from Dover to Bagshot.' That'll save you, you know, £12.27 or whatever it might be. Now, unconfident buyers, infrequent rail travelers, or people who are largely rail rejectors, okay, will need that degree of reassurance to get them over the line. They need to know, 'I'm not being an idiot. Is it safe to park here? Do I get clamped?' etc. If you stop selling to those harder-to-reach customers, it looks like a very shrewd decision, uh, early on, because, you know, you're, you're cutting costs, and the benefits from cutting costs appear early. The consequences of failing to convert people to rail travel appear late. Mmm. And so where we've got to be very careful with all forms of data is that all forms of data are highly unrepresentative and contain biases and weighting. And sometimes those are chronological weighting, sometimes they're demographic weighting, etc., etc. But the first lesson of statistics is, ask to what extent the data you have is representative or maybe distorted by, for example, you know, the relatively, the cost-saving data appears fast, the value-creating data appears slow, and you have to be able to correct for that. And sometimes I would argue that correction will have to be to a degree subjective."
"I'll give you an interesting example, okay? Amazon has that extraordinary customer service thing, which I think is very, very good, which is a button where, let's say you order something, it doesn't arrive, you basically just click a button that says 'Call me back,' and typically within about 30 seconds, your phone rings. There's someone on the phone already who knows who you are, who knows what the product was that didn't arrive, and can get straight to the nub of solving the problem. I think it's actually a revolutionary idea in customer service. I don't know any other organization that's copied it. And I've asked various organizations, and they said, 'We couldn't make the business case.' And my argument was, you don't need to make the business case. Amazon's done it for you. And the reason is that Amazon tests [ __ ] everything, okay? If Amazon does it, there's a good reason for doing it. They've been able to measure, in a high-speed business, you know, the contribution it might make to customer retention or satisfaction or some other measure. You don't have to prove it for yourself. Just steal the idea."
"Okay, well, you know, it's also basically common sense, isn't it? It's like, ultimately, look after your customer well."
"That's where Amazon is interesting, which is that when Amazon, when Amazon debates an innovation, their general question, the first question is not, 'How do we make money?' The first question is, 'Does this benefit the customer?' And then the second question is, 'If yes, how do we make money out of it, or how do we at least make it break even?' Right?"
"Okay. Well, happy customers come back. So, you know, in theory, and so, you know, obviously, obviously there are limits to customer satisfaction. You, you are constrained by, you know, lifetime value and other, other ceilings. You know, you can't lavish love on people indiscriminately, okay? Although some degree of that is actually quite healthy psychologically. Well, enough. But I think there is this weird thing, which is there's an attempt to turn marketing into painting by numbers. Marketing involves human psychology and involves human behavior and human perception. Human perception, once you've acknowledged that human perception and human behavior are an essential part of your objective, you can't afford to be reductionist, linear, purely mathematical, because you're in complex system space."
"But the thing is, my, my experience with brands is they're not doing it. They are very number-driven. They are very ROI-driven. I mean, I work with a lot of brands right now, and every time we do a post, they want to know how many people signed up to X and Y. We've had videos that have millions of views. Like, they almost downplay it, like, 'Oh, it doesn't matter about branding exposure.' But I think about things like the Olympics, when people sponsor the Olympics, like there's no instant ROI of of that 100 million you spent."
"I would argue, I mean, I would argue it's impossible. I mean, I'll give you two examples. Talking to John Roberts, who founded AO, um, you know, if their kids are in the house when they're delivering an appliance, um, they'll hand out a cuddly bear. They've got little cuddly bears that are bit of branded merch. They're in the back of the van. He said, 'Well, I could try and work out the ROI on that, maybe seven years down the line, I would have some reliable data that says that the bears are self-liquidating.' But frankly, that's just getting stupid. If you think something's a disproportionately, uh, um, potent activity at a reasonably affordable cost, I don't think you should need absolutely granular, uh, quantification, because an awful lot of things that marketers do are neither measurable nor attributable in conventional ways. And I don't think we've pushed back against this enough. So when I say measurable fame, okay, what is the value of being more famous than you would otherwise be? It's impossible to quantify that. I mean, because it has a bearing on so many different activities. By the way, just generally, because I have become famous in the last 12 months, it has made a huge difference to what I'm trying to achieve. Yeah, because more people want to help, because more people become aware. It's extraordinary."
"Yeah, yeah, yeah. You get invited to things. I'm sure you've felt the same."
"No, no, no. I mean, it's completely bizarre. Um, I think I, I want to reach the optimal level of fame where you occasionally get recognized at airports, but you don't get like mobbed. Hard to manage that. I've just accidentally, I've just gone over the top of."
"Well, famously, Bill Murray, when people said to Bill Murray, 'I want to be rich and famous,' he said, 'Try just rich first and see if that doesn't do it for you.' That's true, because in some ways, being famous can be a pain in the ass, and it's kind of irreversible."
"Hey guys, I hope you're enjoying the insights from Rory. He's a genius, isn't he? I've written a book, and I really want your help. I want this book, what's your dream, to drop in your inbox in January. If you make an order now, it means that it will get on The Times bestseller list. A pre-order is so important for a new book, and I want this book to get out there so it helps more people. All the proceeds from this book, I'm giving away to fund people's dreams and make videos just like this one to help you for free. Do what you love. Buy if you can. The link's in the bio."
"So, one of the reasons I'm very keen to talk about marketing and psychology to an audience of young entrepreneurs and small businesses is I think if smaller businesses just became 30% more capable at their marketing, you could actually put 2 or 3% on GDP."
"Well, I mean, now you may want to make sure we want, how are we going to help small businesses be 30% more efficient? What, what do you think?"
"Okay, there are, okay, I, okay, let me tell you a story. Okay? So I'm, um, I'm back in Wales. Um, my father's in the hospital at the time, and there's a motorway service station on the A40 between Raglan and Monmouth, and we needed to stock up with a few things. And, um, we drove there, and it appeared to be completely closed. All the lights were off, okay? Genuinely, it looked like the Bates Motel, you know, I mean, genuinely, there was just nothing there. And my wife said, 'Oh, [ __ ] it's closed.' I said, 'Well, this is weird, because I remember going there once on Christmas Day. If they're open on Christmas Day, I'm pretty sure they're open 24 hours a day. Let's just pull in and give it a try.' Sure enough, we pull off the dual carriageway, we get to the motorway service station, and, um, it's open. Now, unsurprisingly, we're the only customers because, of course, from the road, it looks closed as hell. In fact, it looks downright dangerous stopping there, okay? And so we go in, and the, the whole shop's open. It's open 24 hours a day, as it turns out. I was right, okay? You can buy coffee and goodness knows what else. I said to the guy behind the till, I said, 'Mate, all the lights are off on the road. It looks as if you're completely closed.' Now, coming from marketing, I, I'm, my reaction is, 'Are you completely insane? You're throwing away thousands of pounds worth of potential revenue by radiating the impression that you're not open.' And the reaction was, 'Yeah, I think the guy on the last shift might have forgotten to put the lights on, you know, when he ended the shift.' And I was kind of going, 'We're going to tell the on-call, right? Are you? You know, you are throwing away money here, literally.' Now, what suddenly occurred to me is that the sin of omission in marketing gets much, much less attention and creates much, much less anxiety among employees and even business owners. In other words, opportunity costs are much less salient than costs. And it occurred to me, let's say that guy who hadn't turned the lights on, the guy on the previous shift, had stolen a Lion Bar at 2:00 in the morning, right? Fine. There would be all sorts of [ __ ]. He'd be pro-, almost certainly be fired, massive disciplinary thing, you know, D, D, D, D. Now, to be honest, the guy could have stolen 100 Lion Bars and binge-ate the damn things, and it would have been less costly to the business than not turning the lights on. But the business was not exercised about its failure to market itself in the same way that it would have been absolutely down on it if they were leaking some sort of revenue in some way through theft or whatever. And so, off I sympathize, right? You're running a one-man business, running a two-man business, you end up doing your marketing in your spare time. It's not your core focus of operations. It probably isn't why you went into business in the first place. And, you know, effectively, it's kind of effortful. You may be uncomfortable writing, etc. Nonetheless, at its simplest, all marketing involves is what Mark Ritson calls doing the magic 180° flip, where you see your business as a customer, actual or potential, would see it. Okay? You don't see your business as you see it. And a very simple level, if you're running a cafe, okay, and you're allowed to do so legally, even if it's raining or it's quite cold, put chairs and tables out on the pavement. And the reason is that from 300 yards away, without even doing the conscious reasoning, someone will see chairs and tables on the on the pavement, and even if they obviously don't want to sit on them because it's freezing cold or it's pissing with rain, they will go, 'Oh, there's a cafe over there.' One, it's like a massive ad, it's a billboard, okay? And two, it's probably open. The reason it's probably open is because they've put the chairs and tables out. And if they were closed, they would have locked them away to stop people nicking them, okay? So there are things you can do which don't involve words or pictures. They're just behaviors you can adopt which have a huge effect on your revenue and your profits."
"I, I think the 30% be more effective in marketing is actually a really interesting thing. If we can just take people, you know, you, I'd love to do this, you know, and maybe AI will make it possible, by the way, that you can kind of automate marketing expertise for smaller businesses. Maybe webinars will make it possible. But if we could just get small businesses just to spend a healthy percentage of their time themselves, or possibly just bring in an external person over Zoom for half a day, okay, when I say you could put several percent on GDP and economic growth, growth."
"Okay. I, um, jokingly said, and I'm only half joking here, um, one, there should be, well, first of all, okay, first of all, there is a reason why a surprisingly large number of people become successful entrepreneurs who've grown up in a shop or a cafe or a restaurant, and that's because working in a business like that is like a free MBA, okay? Totally agree. Right? If you work, if you work in a shop, if you work in a cafe, you work in a restaurant, you understand the basics of business in its entirety, okay? From, you know, supply chain management to procurement to, you know, legal to marketing. Marketing probably gets the lowest level of attention because people in shops. I blame this on economics, okay? Economics doesn't understand marketing. Consequently, people in finance don't really understand marketing in many cases. And that's because economics assumes that demand is pre-existing. People know what they want, they decide on what will maximize their expected utility, and they set about acquiring that thing in the cheapest way possible. And so economics begins from the ludicrous premise that demand is pre-existing, and your job is to satisfy it. Um, absolute bollocks. I mean, you can create demand out of nowhere simply by being in the right place at the right time with the right message, or even with one or two of those three components, okay? You can create demand out of nowhere. Secondly, and this is really important, um, what economists think people want, which is the acquisition of a good with minimal transaction costs, as quickly as possible, at the lowest possible price, which is what a lot of businesses are optimized for, isn't what people want at all. Now, if you want the example of this, one of the points I make, which is vital to understand, it's not true in physics. It's not, well, according to Einstein, actually, it is, but we'll park on that. But Einstein and Neil Bohr made this point that in high sophistication physics, the opposite of a good idea isn't wrong, it could be another good idea. Mmm."
"Now, let me give you an example in retail, okay? Um, yesterday, uh, I went into M&S. By the way, if you've got the M&S app on your phone, you can actually self-scan at M&S, but it's deeply hidden on the phone. You've got to actually find the the scanning function. So you don't need to check out at M&S at all. You can just go around, scan your items, and walk out feeling like a shoplifter. But it, you know, okay? And some of the time, by the way, I do that. Okay? I go in, I self-scan, I walk straight out. Um, you can even pay on the phone. Okay? I only needed to buy five things, that was perfect. That is the most streamlined form of retail there is, you know? Or Amazon Fresh would be another example. But alongside those things, there exist things called farmers' markets. Now, a farmer's market, if you want to develop a farmer's market, you basically imagine, how could you create the version of Tesco Express that's possible? Okay? The things are quite expensive, there are multiple people often selling the same things, you have to pay separately in eight separate places. From a purely utilitarian standpoint, a farmer's market is an absolutely ridiculous idea. That's exactly the point. What people want is the opposite of the streamlined retail experience. They want to have a bit of a chat, a bit of a shufty. You know, they actually, if I'm being honest with you, they often want to pay more for things. Okay? Never assume that all consumers, all the time, want to pay as little as possible. Complicated. Okay? Prosecco, for example, the entire wine industry is driven by people paying more for wine, not to buy better wine principally, but to mark an occasion. Okay? So when you look at what people spend on wine, it isn't really a quality-price trade-off as economists would like to see it, okay? What it is, is it's it's Wednesday evening, it's £6.95. It's my wedding anniversary, it's £28 quid, okay? Now, the reason that's important is that the British sparkling wine industry, I think Chapel Down were the people who pioneered it, finally had this very brilliant insight, which is that if you're producing a competitor to Champagne, it doesn't matter how good the drink is, if the perception is that you paid $1.99 for it, it's not doing the job of Champagne. Because the job of Champagne is to signal the importance of an occasion, or it's to signal hospitality. I, I'm, you know, I'm saying my daughter's birthday is important by not buying the cheap stuff, right? Or it's the signal generosity. Thank you, here is a bottle of Champagne. The perceived value of Champagne, the fact that Champagne costs below, God, I'm out of date here, but I generally buy the British stuff, you know, you can't really buy it below £17, £18 quid, means that Champagne, unlike Prosecco, is a fantastically reliable mark of generosity or hospitality because you go, 'Okay, this guy has spent here.' And some things just need to be perceived to be expensive. So Chapel Down started it. Other people, we're, we're pretty much in wine country here, in fact, aren't we? Okay? Other people have done it. They suddenly realized if you charge £23 quid for a bottle, you're actually competing with Champagne. It doesn't matter now the contents, by the way, I'm just going to defend the British sparkling wine industry. The contents are astoundingly good. I would argue at their best, they're well up there, even better than most mainstream Champagnes. But the point is, the, you're not doing the job of Champagne if you actually make it £8.95. Doesn't matter how good the contents are, you've basically failed. And there, this is really important because one of the things you have to understand about marketing is that to some extent, it's the science of knowing what economists are wrong about. So I'll give you, I'll give you a really interesting problem which often besets marketers. I don't think it appears in many marketing textbooks, but it's a surprisingly common problem, which is what I call the 'too good to be true' problem. Let's imagine you're going in to buy a coffee machine, an espresso machine, and one of them has more functionality, it's got an LCD display, it's got a bit of fancy stuff, okay, on it, and it seems to have more functions and therefore more utility than the one alongside it. But the one with more functions is also cheaper than the one alongside it. Now, to an economist, to any rational person, that's the easiest decision you have to make. Highest utility, lowest price, slam dunk, no-brainer, nothing to see here, credit card out, move on. In reality, because humans have second-order intelligence, in other words, they don't just think what they're thinking, they try and second-guess what the other person's thinking. This is actually going to be deeply confusing because they go, 'Well, if I had a better coffee machine, I'd charge more for it to make more money. So this doesn't really make sense.' And now they've got cognitive dissonance. Which is better machine, lower price? I'm now confused, okay? I'll probably buy neither of them. This actually happened when Nespresso launched the Vertuo machine. They had the Vertuo and the Vertuo Plus, and they charged the same price for them. And, uh, I went in and spoke to a salesman in, it was a shop in Canterbury, and I said, 'Why are they the same price if this one's a bit better?' And he said, 'Everybody asks me that. It was basically screwing with people's heads.' I said, 'Look, just put five quid on the price of the Vertuo, the Vertuo Plus, or knock five quid off the price of the Vertuo manual, because otherwise people are just, you know, why did they charge?' Everybody was going, 'I don't get this.' So, so they've got the same price, but one of them has a lid that opens automatically, and the other one has a lid you have to open manually. Okay? Now, you have to have a price difference there for the consumer to make sense of what you might call the assumed trade-off between price and quality. And they, they arrive at many decisions with this assumed trade-off, which is, 'You get what you pay for.' And if you mess with that assumption, you might well be throwing money away, even though your economy, your accountant will tell you you've cracked this market, okay? You got a high-quality product at a lower price. No, you haven't cracked the market because people are going to be confused as hell. And so an example of a category that falls into that, I think, is frozen food. So my friend Guru Madhavan, who's a very brilliant engineer, he said there were actually two industrial revolutions. There was the one where we mastered heat and the production of heat, and there was the one where we mastered the production of cold. Freezing as a preservative is astoundingly efficient, not for every single foodstuff, but for a huge range of foodstuff. It's amazing at the preservation of nutrients. Uh, you have a much more efficient supply chain because you don't need a chilled supply chain, you have a frozen supply chain. You can store things in, at a frozen state for weeks or months. You don't have to worry about, you know, throwing away food that isn't sold within the sell-by date. Um, consumers can take it home and they can keep it in their magic cupboard, also called a freezer, and they can eat it tonight, or they can eat it in six weeks' time. It reduces the number of artificial preservatives and other, you know, processed chemicals that are required. The whole thing was basically a gift from God. And yet frozen food, because it consequently became cheaper, became slightly stigmatized and is now seen very largely, I think, as a down-market food. And that, not, not quite true. There are people who've broken that kind of. In other words, to break through the 'too good to be true' heuristic, you've got to do something quite weird. Now, the chain cook, which you probably have around these parts, do you? Which is a, a vertically integrated retailer which makes its own food and sells it only actually in its own stores and some concessions. Okay? In France, you have a thing called Picard, which is their equivalent of M&S Simply Food. Basically, only sells frozen food. It's like a Trader Joe's but for frozen stuff. It's amazing. But in the UK, we have this problem, which is literally the 'too good to be true' problem, which is that people, you know, maybe what we should have done is made frozen food really expensive, okay? But we didn't. We followed economic logic and we made it, you know, generally cheap. And so consequently, it was also, I think Marks & Spencer probably did frozen food a disservice because they tended to offer fresh ready meals, and the consumer in Britain tended to assume that if M&S does it, it's probably best. But there was a similar case which happened to me about this 'too good to be true' problem, which is that you, if you have a really good cafe, make it a bit pricey, okay? Otherwise, it doesn't make sense. And the 'too good to be true' heuristic. Someone contacted me from, um, uh, Berkeley in California. They're at the university there. They're, um, Indian-Americans, and they've worked out that using NASA food preservation technology, you can basically make, and I can vouch for this, Michelin star quality Indian food, biryanis, for example, korma, etc., preserve it in a pouch with no need for even for refrigeration, and you can give it a shelf life of about, um, you know, eight months. You can just leave it in the cupboard and then you pop it in a pot, okay? And, uh, it's effectively, I, I, they, they posted it to me. It arrived just in the ordinary post, no refrigeration, from California. I put it in a pot. My wife will vouch for this as well. If you'd had the meal at, say, Tamarind in Mayfair, you wouldn't, you, you wouldn't have complained at all. In fact, you would have been, you know, uh, you know, completely satisfied, pleasantly surprised even. Amazing. And I said, 'You, you know, in logical terms, you've hit the motherload. In psychological terms, you're up against this massive problem because people won't believe it.' And we're discussing now what you have to do to overcome this hurdle. Now, now I spoke to Dan Ariely about this. One of the ways you can do it is you can have a frontman who is perceived to be a magician, which is broadly speaking what Steve Jobs was. So Steve Jobs had this extraordinary power to stand on stage, his own personal mythology, and people were willing to suspend their usual cynicism about things. Elon has a bit of this among some people, but alienates other people. But Elon has a little bit of the element of the magician to him. Mmm. You, that's one way of overcoming it. Another way is by actually adding work to the production. So even though all you have to do is put in a pot and heat it, you know, do we need to have other ingredients that need to be added? Do we actually stipulate that it can't be microwaved? In fact, you can microwave and it's absolutely fine. But we asked Charlie Bigham, interestingly, all of those Charlie Bigham dishes, I think this is what's called the IKEA effect. It says you have to put them in the oven to cook them. Now, I think that's because you enjoy the food more when you've waited for it. The effort you've put into it by putting into the oven basically creates a culinary experience which the microwave doesn't. The other genius thing that he did is that kind of bamboo packaging stuff, the weird wooden packaging, which fundamentally creates a kind of craft, craft-manufactured vibe rather than the factory-made vibe. But all of those things, we, exactly like the the chairs outside the cafe, we perceive them without actually being conscious of perceiving them. We don't actually go rationally, 'There are chairs outside the cafe, therefore it must be open because a cafe that was closed would have locked the chairs inside.' It's System 1. We just automatically go, 'Well, hey, coffee's chances over there.' Now, one of the other things, by the way, all small businesses, one, British schools should have a mini-MBA course for one term, okay? In teaching them basically the basics of business in the sixth form. There, there should be, there should be a business. Secondly, one entire week of the course consists of one sentence: 'Answer the phone.' Partly, there's this weird thing. This is what I mean about the 180-degree flip. So literally, after I'd been to that service station, okay, we ring the local fish and chip shop. Now, there's always a bit of weird debate about whether chip shops open on a Monday, right? Because traditionally, a lot of them didn't. A lot of them didn't open on Sunday, I think. But chip shop opening hours are slightly erratic at the beginning of the week. We ring them up, no answer. We ring again, no answer, okay? Now, what do you assume? They're shut. No point in even going there. As it happened, we drove past, the place was open, went in. We said, 'Why don't you answer the phone?' They said, 'Oh, no, when we're busy, we don't answer the phone.' Now, don't really rude, but if you know, if someone came into your store and you said, 'Okay, everybody would recognize that's really bad business. You just lost a customer, okay? If you don't answer the phone, you just lost a customer. In fact, you might have even lost a repeat customer, because if you don't do that two or three times in a row, they'll never come to you, and they'll never find out how good your bloody fish and chips are. Second thing, and I noticed this extraordinary for anybody who runs a retail business, the last words before he died of, I think it was William Sainsbury's, who is the founder of Sainsbury's, literally his dying words were, 'Make sure the stores are kept well lit.' And the number of shops, I don't know if you've noticed this, but a lot of corner shops, for whatever weird reason, they put up loads of posters and things in the window, and, you know, or whatever strange kind of wraps they put up in the window, consequently, no light leaks out. So to anybody in a car, okay, they'll assume the place is closed because there's no light coming from the inside. There's one bit of advice I'll give. I don't know if you know Squarespace? No? Okay. It's a wonderful thing where it's a brewery and a deli. It's, it's, it's just outside West Brompton, so it's on your way to London, actually, from here, forever you want to stop in. They have street food in the evenings. They don't pay me to do this, right? I just like the place. Sponsored things down below. While you're there, also go into West Brompton and go to Busy Bites, which is a Jamaican Italian cafe and restaurant. Sounds like it doesn't work, it's actually brilliant. She's Jamaican, he's Italian, and the way she describes it is, 'He does the culinary genius, I add the spice.' But actually, it's utterly fantastic. Okay? But, um, for a long time, they had an entrance which was not lit up, and so as soon as it was dark, it said to my amygdala, 'Shut.' Not answering the phone says to my amygdala, 'They're shut.' What I mean about the 180-degree flip about marketing is you have to make the effort to see your business as someone who knows nothing about your business. Be the customer every single day, for effectively, and be the really ignorant customer who comes to it completely blind. What does your typography say about who you are? Um, if you have the apart from else, it's quite a difficult turn to make off quite a fast road. So if you don't really light out the entrance, people won't be able to go there. But, but I mean, when I say the last words of William Sainsbury, 'Make sure things are well lit.' The use of lighting as an invitation and the signal that we're open and we're keen for business is really valuable. An awful lot of small businesses, I notice, are actually completely pissing that away by look, as soon as, as soon as it's dark, the consumer, if lights are not streaming out of the inside, will assume that you're shut. Mmm. Uh, there was an extraordinary place in West Street in Covent Garden which was actually a Joel Robuchon restaurant, I'm not even sure it didn't have a Michelin star, but they blacked out their windows. Part of the thing else, you don't want to go into a restaurant if you can't see inside. I mean, literally, there are, there are these extraordinary mistakes which small businesses make. As I said, answer the phone, make it absolutely explicitly obvious that you're open. Okay? Genuinely, if you miss a phone call, call back 1471 or leave a voice message. If, because a lot of people listening to this might be like, 'Well, I don't have the manpower.' 'Open.' Yeah, yeah. I mean, by the way, I don't know why there isn't an off-ship delivery business that's taking the UK by storm. But that side, I also think that they're taking that online. What I see is you go on someone's website, say, a service company, and people put all their social media links down the bottom because they think that they should. Yes. And then you click on one, and it's not working, or you click on one, they haven't posted in three months. And by the way, by the way, okay, I'm paid to do marketing, right? That's my job. I'm really simple. My dad ran a small business, and looking back, we should have done a lot more advertising. When we advertised, it was very successful. We couldn't, in time, track it or attribute everything, but when you ran ads in the local paper, you got a lot of business, and we should have done more. And the truth of the matter is, the day-to-day of running a business, if you've got kids, and you can, if you're running a small business and you've got kids, if you could delegate the marketing to your kids, that wouldn't be a bad thing to do, because you need someone who isn't absolutely embedded in the day-to-day of kind of cost control, meeting with the accountant, you know, the freezer's broken, okay? You need someone just to sort of float above that a bit. Because I totally sympathize with anybody running a small business. But I mean, if we had genuinely, you know, if I think schools included, first of all, I'd give everybody their own business to start with by default, because once you have a business bank account and you can actually put money away and keep it without it being taxed instantaneously, you fundamentally think differently about the business. So I'd almost make that a default, you know, give everybody a limited company when they leave school. Totally right. Everyone should think like a limited company as an individual. You should."
"One of the best things that happened, okay, was the unintended consequence of the Thatcher era, and it was a thing which was called the Enterprise Allowance Scheme. And something very funny happened with the Enterprise. So what, in rather than being unemployed, they would give you more money, more unemployment money, if you basically said you're running a business. Now, it was intended, I think, so people would start as window cleaners or start small businesses or do building work or whatever it might be. And actually, um, a lot of people thought they were gaming the system. They had a band, and they discovered this hack, which is, if we pretend this is partly why the 80s was so good at creating really good music, these people in a band, if we pretend our band as a business, they literally thought they were just pretending. They are, which is, if we pretend our band is a business and we, like, maintain accounts and do do do do, we'll get more money. So that's what they all did. But the fantastic unintended consequence, and I think they were kind of more funny, daddy conservatives, the more enlightened conservatives went, 'That's great. There used to be a band, now they're a business.' The more funny, daddy people said, 'This isn't what we intended at all.' Okay? But once you actually looked at your band as being a business, you thought about it in a completely different way. You became inherently more businesslike in actually kind of induced a kind of discipline. And so what actually happened was a lot of these bands, obviously some people gamed the system, they never had the intention of doing it, but a hell of a lot of these things actually turned into really successful bands, and it was the actual inculcation of a little bit of business discipline that probably helped."
"So, I mean, as I said, I mean, you know, one of the things I, I genuinely believe is if we could just make sure, uh, in, in various ways, that, uh, uh, small businesses would just, all they don't have to be brilliant marketers, but if you can simply be competent, in other words, you stop doing the things that, without your awareness, are actually either putting customers off or causing customers to think you're not interested in them, okay?"
"I'll give you a little tip, okay? Here's a little marketing tip for anybody who runs a shop. If you want to lose a customer for life, okay? Uh, lock your door at the second your your shop closes. And if anybody comes and tries the door, just wave them away and shout, 'We're closed.' Now, that's not an unreasonable thing to do an hour after closing time, three minutes after you're technically supposed to close. Most coffee shops do it 15 minutes before they even go, that's for getting the mop out. It's so they can bunk off early. It's so bad for the brand. And what they do, what they've discovered is that if you put a chair upside down on top of a table, or a chair upside down on top of another chair, or you lean them up against the, um, the wall, basically, no new customers come in. So you can descale the machine, clean the toilets, get the gunk off the off the cappuccino nozzle, and you can bunk off home early. Now, the problem that causes is that coffee shop owners looking at the data notice a fall-off in coffee sales between say, 3:30 and 4. That forward and assume there is declining demand for coffee after 3:30, therefore there's no point in opening until 5. Rub. The actual thing is..."
There's declining demand for coffee after 3:30 because coffee shops, which are radiating the signs of closing down. In other words, we don't want you in here. And if you, if you do come in, you'll be drinking your coffee effectively under time pressure. That's highly off-putting to the consumer. Once there's a chair upside down on top of another chair, once there's a mop leaned up against the wall, once someone's mopping the floor, nobody wants to come in.
By the way, I, I discovered this by accident myself. I had a coffee shop I started in Hong Kong called Grace, and we assumed, like all the coffee shops closed at 4, that Starbucks, all his other outlets had done their research, and it wasn't as popular after four. So we started serving Mojitos from four. We kept the coffee machine, coffee machine going. Turns out we got so many more orders for coffee than Mojitos. But we assumed that, we assumed that Starbucks, in well, we're obviously now Starbucks, someone is looking at the data and they're extrapolating logically from what the data appears to tell them. Except there is what is technically called there, a confounding variable. Okay, the con, the variable they're looking at is time of day and demand for coffee. The confounding variable is the staff in the coffee shop.
Now I realized I'm actually going to be on a bloody Coster employee hit list after I've done this. Well, it's not their fault because they, they're told 4:00, 4:15, your pay, your pay stops. So in some aspects, they've got to close the whole thing and be out by 4:15. So they're just trying to do the job efficiently, 'cause they know we probably need half an hour. The DC incentive, exactly perverse incentives. By the way, let's talk about that for a second because that, that happens a lot in people's businesses. Un own any metric that becomes a target loses its value as a metric, apart from anything else. That's good, heart's law.
Um, I'll tell you the lovely story about where you can, um, uh, since we're in Sussex, is, um, um, uh, the lovely story about where you can look at data. 'Cause one of the problems with logic is that once we come up with a logical explanation for something, we stop looking and we say, "Well, okay, after 4:00, people don't want coffee." That kind of makes sense, right? Nothing to see here, move on. No further investigation needed. And the real thing, the confounding variable there, is the staff irradiating bad vibes to potential customers through their behavior. It's nothing to do with the, um, actual demand for coffee. In fact, a hell of a lot of people would like coffee to take on the train home, okay? You just want a treat at the end of the day. Um, but a lot of coffee shop shs, as you said, you, you assume they'd all done their research and said, "No point in staying open." No, no. It's a bit like you said about Amazon. You assume Amazon done a research and know what they're doing.
One of the most brilliant marketing moves of any cafe or restaurant in the last 20 years was Dum. Had the problem that every Indian restaurant does, which is it tends to be empty at lunchtime, busy in the evenings, busy when the clo pubs close. Uh, actually half dead at lunchtime. And how do they respond to this? They opened a breakfast. They open for breakfast. Now my hunch is that one of the reasons, uh, that people don't go into Indian restaurants in at lunchtime is 'cause they're already empty. If you open for breakfast, there'll be people hanging around and there'll be people sitting around there at 10:00, 11:00, 12:00. Once there are five or six people in a place, it feels a lot less weird going in. That, I mean, literally, if you're running an unsuccessful restaurant, um, you could almost give free meals to people to populate the restaurant, particularly if they're sitting outside on a table or something, because nobody wants to be the only customer in a restaurant. The nightclub model, isn't it, where they make you wait in the queue outside? There's no one there, no one inside at all.
Um, but the example of where I give the data can be misleading is the John Lewis, Tunbridge Wells story, which is if you go to the, what used to be John Lewis in Tunbridge Wells at the retail park, do you all know that? You, yeah, okay. Um, it went bust and they closed it down. It's now derelict. And I'm convinced that people inside JN have come to conclusions like, "The demography of Tunbridge Wells is not sufficient to support a a branch of John Lewis." And there's a great book I recommend to everybody who's running a business, okay? Any small business. It dates from like 1916. It's called Obvious Adams, and it's by a guy called Robert updegraff. You can buy it on Amazon for sort of £4.50. You can read it, um, in a s, well, you can practically read it in a single, but you can certainly read it in a single sitting because it's a very short book. When you first read it, you'll think this is a really hokey book. Why is Rory recommended this kind of American hokey business book? About five pages in, you'll start to realize it's actually very, very brilliant. But Obvious Adams is a guy who does what they did in The Big Short, one of my favorite films. He goes and looks when something happens. He doesn't look for an explanation from available data. He acts like a detective, as you did with the coffee shop, and he said, "What's really, really going on here? What's really driving this?" We have our logical explanation. Our logical explanation has has caused us to stop asking questions. But maybe there's another explanation altogether.
So going to have a shufti around John Lewis in Tunbridge Wells. First of all, it has its own car park. You have to park in their car park. It doesn't share a car park with anybody else. So you can't combine a trip to John Lewis with a cheeky visit to TK Max or Boots or anybody else. No, no. It's John Lewis or nothing. First mistake. Second mistake, the entrance to the car park was in such a stupid place that you could only conveniently turn in if you were leaving the retail park heading for the A21. Because if you were coming into the retail park, you had to do a 180 ROM mini roundabout, which is a pretty perilous thing to do, okay? And then turn left. But the sign for the car park was in the wrong place. So by the time you'd seen the sign, you'd missed the turning. Okay? Thirdly, the John Lewis was arranged in a way that the narrow, the signage was on the narrow edge of the building, which made the building look about a third the size than it actually was. It was actually enormous. So it was kind of, it, it was narrow side onto the road, so it didn't look like a big deal. It actually went back for bloody miles. Uh, there's another reason which I can't remember, but I, I, I, I might remember it at the end, which was another off-putting reason to go.
But then the final fatal thing was some weird branding decided to call it John Lewis at Home. Okay? Now, when you see the words "at home," you assume it means furniture. 95% of people aren't in market for a big furniture purchase at any one time. People who've moved house might go there, you know, people who, you know, a refurbishing might go there. Most people will go, "Don't need a sofa." Not think home, home base, etcetera. Okay? Now, I don't know why they didn't just call it John Lewis, but they didn't. Because I think 'cause it didn't sell women's fan, and it didn't sell cosmetics. I may have got that wrong, but there were a couple of things that a big John Lewis would have sold, they didn't sell. Now I'm a bloke, neither of those things is particularly high interest to me. Now, the only reason I went there is because at 7 Oaks, the Waitrose before Christmas, the click and collect cupboard actually got full. So they said, "If you want to click and collect your Christmas present, you'll have to get it sent to John Lewis at Home in Tunbridge Wells." So I did that. So the first time I actually went there, expecting to pick up my present from what was was a furniture shop, they soell flat screen TVs, they sold computers, digital radios, they soell crockery, they sold lighting. It was Fant, was cornucopia, right? And I keep talking to people and they said, "I assumed it was furniture." I drove past that store for five years without going in because I didn't want to buy a sofa. Okay? That simple off-putting thing. It's exactly the same as the motorway service station not turning the lights on. If people can pick, pick up a signal that says, "Not for me." Okay? There's sometimes more information that puts people off.
Absolutely right. Do you think there is an art to the marketing side that you know, we could give the audience like, how, how do people, what you described there is, I think, simple marketing. Is there a tip on if people are listening now, they've got a business, how do they market themselves? Any, any structure you could give people to think about?
Yeah, very interesting. Um, not everybody has this opportunity, but 'cause if you start from scratch, it was a bit easier. Um, first of all, you've got to decide who your customers are and who your potential customers might be.
Um, sometimes, by the way, uh, invest in things that seem a bit gratuitously expensive because if a business invests in its awnings or its furniture, or a business goes to the discretionary effort, for example, cafes that put rugs on the seats. Okay? Those things don't always do these things. By the way, if you're a cheap place, very popular with local locals for your low prices, if you fancify the interior, people will perceive that your prices have gone up, even when they haven't. There's a reason why Aldi and Lidl kind of look a bit okay, and it's price perception. Tesco found they did some research, I think, and they found that when you renovate a Tesco store, people's perception of the prices goes up, even when the prices haven't gone up. Um, price perception was very, very odd. By the way, if you interview people outside a supermarket and say, "All those things that you bought, what did you pay for them?" They haven't got a clue. They'll know what they paid for milk. There are a few known price items, but once they bought them, they haven't got a clue what they paid for them. Um, uh, but generally, you know, there, there is a scope for you know, there's scope for being a really, you know, scruffy pub. The scope for being, you know, the, the market niches for those places exist. I'm not suggesting the last thing I want is, uh, economically for marketing to create homogeneity because when marketing creates homogeneity, you actually destroy the value of the overall marketplace. The value of a, the value of a category is maximized when lots of different entities competing within the category explore and and, uh, target different need states, different market niches, different demographics.
I've always believed that there is a kind of Jack of all trades heuristic, which is if you only do one thing, people believe you're going to do it really, really well. So there is a reason why people basically think that fish bought from a fishmonger is better than fish bought from Tesco. They think that meat bought from a butcher tends to be, you know, or a farmer's market. Similarly, they tend to, um, believe it's a reasonable heuristic that someone who only does one thing has to be good at that thing, 'cause if they weren't good at that thing, they wouldn't be in business anymore. Whereas actually, you know, would you buy oysters, okay, from a burger bar? You go, "Well, they're not really going to, you know, are they going to be that great at maintaining the hygiene of oysters?" And if it's only 10% of their business, they're not going to be paying that much attention. Whereas if you're an oyster stall, okay, a whole different set of rules apply. You know, if you only do one thing, you have to be really, really good at that thing.
Great advertising campaign for Gordon's Gin, which never actually, um, this is about 20 years ago, and the headline was, "You can." The whole point that Gordon's only make gin, okay? And the headline was, "You can only be really good at one thing." And the visuals were hysterical. There were things like Jeff Capes' butterfly collection. Jeff Capes was a famous Shu butter, an enormous great beefy guy, and his butterfly collection was like loads of bent pins and butterflies with their wings falling off. You know, the idea being you can be good at shop putting, but you can't be good at shop putting and butterfly collecting. And that was kind of an ad that effectively was exploiting the Jack of all trades heuristic. In other words, master of one.
So I've always wanted to own a chain just called Bacon Sandwich. And the point is, you only sell bacon sandwiches. You probably have two kinds of bacon. You'd offer three kinds of bread, okay? You'd only offer two drinks, which would be champagne and builder's tea. That's it, okay? And, uh, you'd have a really perverse rule, which is you'd allow brown sauce, but you wouldn't serve ketchup. Can we just actually open that up and do it? Should we, should we just do it? Do it. My view is that about 30 to 40% of the time, I always get annoyed in the Eurostar because they have this attempt, this sort of Belgian attempt at a full English breakfast on the Eurostar, which is a tragic apology for an English breakfast. And I go, "On the way home, when I'm coming back from my meeting, I wouldn't mind going large. On the way out, I want to lose my laptop. I want a bit of table space. Can you just bring me a bacon sandwich?" And there are an awful lot of occasions where I, I grant you, it's perhaps not, you know, we'd possibly have to have, um, uh, vegetarian bacon. No, actually, that, that. No. You, so there's a weird thing where, oddly, there's a signaling value to not being. This is what I mean about the opposite of an of a good idea is another good idea. You can be very customer-focused, but there's also this weird signaling value at some level of being not customer-focused, of just going, "These are the rules. We know about this stuff. Take it or leave it."
Now, Five Guys, when they developed their chips, fries, they went for expertise to a place, uh, it's in Ocean City, Maryland, and it's called Thrasher's, I think. And they, they've got three outlets. They perversely like close for part of the season. They only sell chips, okay? Now, this is the weird thing. Bear in mind, this is the United States. You buy a cone full of these french fries from Thrasher's in Ocean City, Maryland. Now, as a Brit, I've got to totally high five these guys. You can have salt, you can have vinegar. You can't have ketchup. Now, in America, that's really, really pervy and weird, okay? Not offering people ketchup or mayonnaise to go with chips, but only salt or vinegar. But they're a hugely successful business that's been going since the 1920s. And they just go, "This is how we prepare our food. This is how you believe you should like, you should like it." And actually, well, whatever reason, that kind of oddly, that kind of corporate assholery sometimes works. I think it also symbolizes that the quality of the potato must be good because you don't need to pervert it. In other words, what you're saying, exactly that.
I think now my view of my view of to about offering brown sauce but not allowing ketchup is just one of those whimsical things. It gets conversation. You know, then that it's one of those massively divisive things, isn't it? The, the, the ketchup versus HP Sauce bacon sandwich argument. Now, one of my colleagues, um, guy, um, uh, um, called, um, P. Matt, he's absolute, um, cafe guru, and he weirdly, as a ketchup fan, which I strikes me as totally perverse and weird. But broadly speaking, you know, I think HP Sauce is a remarkable thing. The yin and the yang contrast. But I, I think bacon s, bacon roll as a place which just only sells bacon rolls, champagne, uh, builder's tea, brown sauce or no sauce, that's it. You're making me hungry, by the way, talking about it. You know, I, I think you do something really remarkable. It's a good lesson for people listening. If you look at any show like the Gordon Ramsay goes into a restaurant to fix it, nine times out of 10, it's because there's too many things on the menu. And he, but Donald's actually the number of businesses which basically were rescued by, um, focus. The two biggest ones are, uh, uh, Apple, where Steve Jobs, I literally had a friend who was in the presentation from Steve Jobs, who, by the way, on a personal level, was a total [ __ ] I mean, Steve Jobs turned up late for the meeting, basically, so he could humiliate the two executives who turned up on time. Mmm. It, the whole thing was, I, he basically came and said, "I don't know what these idiots have told you, but I'm going to tell you this." And he said, "When I arrived at this company, we had these 19 products in development. I'm getting rid of this one, this one, this one, this one, this one, and we're going to focus on these four." And I, I think it must have been the iMac and possibly the iPod at the time. Okay? So I had an advertising friend who was actually, you know, had Steve explain all that. And interestingly, if you look at the early days of Apple, in the first incarnation of Jobs, their choice architecture was a total mess. It was like, you know, the so and so 2C. Actually, the iPhone's always gone wrong when they [ __ ] with the choice architecture. When they've added the iPhone 5C, and they've added low-margin iPhones under pressure from typically the investor community who say, "You're too expensive, you need to produce a low-cost variant," forgetting the fact that the low-cost variant of the iPhone is your dad's old iPhone. Okay? They're not really understanding the consumer at that level. You know, people would rather have a three-year-old iPhone, okay, than have a new brand new iPhone that says, "I'm not a real iPhone." It's very similar to second-hand cars, actually, to some extent. You know, people, you know, actually, you know, that's one of the problems you have with the new car industry, which is that second-hand cars are pretty sodding good. You know, and actually people would rather have a 2-year-old really good car than the than a brand new slightly compromised car. And the same, I think, pertains with iPhones. But the choice arch there, and of course, the most famous one is McDonald's. And, um, that wasn't Ray Croc, actually. That was the McDonald brothers who basically borrowed from, uh, they borrowed from car manufacturing, slimmed down the product that was available, which meant that you could serve people really fast, which was the diametric opposite of the American diner, where you could have anything anywhere you liked, you know, substitutions, eggs over easy, sunny side up, everything made to order. And McDonald's basically just did a 90° flip and said, "See that? We're going to do the absolute opposite." And that's what I mean is that there, there's often a gap at the market, a gap in the market at the opposite end of the market.
I'm Rory Sutherland, and I'm on Help Bank.